What to Look for in GameStop’s Earnings

GameStop Corp. (NYSE: GME) is set to report its fiscal first-quarter financial results after the markets close on Thursday. The Thomson Reuters consensus estimates are $0.61 in earnings per share (EPS) on $1.97 billion in revenue. In the same period of last year, GameStop posted EPS of $0.68 and $2.06 billion in revenue.

Trading at just above eight times this fiscal year’s earnings, this video game retailer might be a steal at this price level, looking at the short term, but over a longer term it could be a value trap. These earnings should bring some insight into where this stock is really headed.

This company operates as a multichannel video game retailer. It sells new and pre-owned video game hardware; physical and digital video game software; pre-owned and value video game products; and video game accessories, such as controllers, gaming headsets, memory cards and other add-ons for use with video game hardware and software.

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However with the advent of the Xbox One and PS4 and downloadable games and content, this company could suffer on the brick-and-mortar side, which constitutes a fair amount of its business.

Prior to the release of the earnings report, a few analysts weighed in on the stock:

• Piper Jaffray reiterated an Overweight rating with a $41 price target.
• Wedbush reiterated an Outperform rating with a $36 price target.
• Credit Suisse reiterated a Hold rating.
• Baird reiterated an Outperform rating with a $46 price target.

So far in 2016, GameStop has outperformed the broad markets, with the stock up over 7%. Over the past 52 weeks, the stock is down about 22%.

Shares of GameStop were trading up about 1% at $30.07 on Thursday, with a consensus analyst price target of $36.23 and a 52-week trading range of $24.33 to $47.83.

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